NEW YORK – June 3, 2016 – Which property types hold the most promise for investors this year? Experts from research firms Situs RERC, Reis Inc., Green Street Advisors and Real Capital Analytics offered their recommendation to National Real Estate Investor.
1. Senior housing
An aging population is making senior housing a good bet for investors. "Senior housing is experiencing upward demand, but with this property type, you can't increase rent as rapidly as you can with multifamily," notes Barbara Byrne Denham, a Reis economist.
2. Student housing
The pre-tax yield for student housing properties was 7.6 percent during the first quarter of this year, according to data from Situs RERC.
"Student housing operations are generally in line with the long-term trend, and the sector's defensive attributes have not gone unnoticed by investors," says Andy McCulloch, managing director and head of real estate analytics at Green Street Advisors. He says that student housing is the best performing sector year-to-date in the REIT space (Real Estate Investment Trusts).
Big-box flex warehouse space is one of the healthiest industrial sub-sectors, which has been getting a lift from e-commerce tenants.
"Against a backdrop of healthy demand boosted by e-commerce, market rent growth has been stronger than expected," McCulloch says. "While new supply and obsolescence are always concerns for industrial, the sector's future growth prospects look better than past performance would suggest."
4. Neighborhood community centers
Situs RERC calls the neighborhood community center the second-best investment at the moment, right behind industrial warehouses.
"Strip center tenants are generally healthier than mall tenants today, especially when putting department stores into the mix," McCulloch notes. "While retailer bankruptcies are a continued nuisance in the strip sector, the lack of ground-up development points toward a continued improvement in operating fundamentals."
The price appreciation within the self-storage industry has risen 16 percent over the past years, according to data from Green Street Advisors.
"Storage continues to become more accepted as an institutional asset class, and operating fundamentals have been phenomenal," says McCulloch. "Higher cap rates, solid NOI [net operating income] growth, and low cap-ex make self-storage a great business."
Source: "Seven Property Types to Invest in This Year," National Real Estate Investor (May 26, 2016)